Skywest catches resources tailwind
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Skywest catches resources tailwind
interesting article from Fridays Aust...
From The Australian:
Skywest catches resources tailwind
Steve Creedy, Aviation writer | August 10, 2007
PERTH'S Skywest Airlines is entering an era of expansion as it catches a strong updraft from Western Australia's booming economy and the growth of fly-in/fly-out mining.
The after effects of the bitter takeover battle waged by Perth-born Jeff Chatfield and his Singapore-based company, Captive Vision Capital, have faded and the airline is planning to double its fleet of Fokker 100 jets to six.
It is also scouting out replacements for its seven ageing Fokker 50s, boosting its network and planning an ambitious move to connect the Goldfields town of Kalgoorlie to the east coast.
Former Jetstar Asia executive Paul Daff has had his feet under the chief executive's desk for three months and says the growth is a combination of the boom in fly-in/fly-out mining contracts and rising regular public transport traffic.
Mr Daff said he worked closely with managing director and industry veteran Hugh Davin and chief operating officer Mike Hoare to make sure Skywest benefited from the boom in Western Australia.
"We've ramped up quite a lot of our regular public transport routes to places like Geraldton, Albany, Broome and everywhere else as well," he said.
"When Qantas pulled out of Kununurra, we ramped up Kununurra with the F100 and even Exmouth, which used to be a Fokker 50 route, is predominantly an F100 route now. We went back into Port Hedland."
Skywest has a diverse route network that takes it as far as Darwin and Bali and involves carrying about 350,000 passengers a year.
Mr Chatfield said yesterday the group was also considering services to Singapore.
Mr Daff said the planned Kalgoorlie-east coast route would be for passengers, partly driven by demand from the Goldfields region.
The airline hopes to link in the mining companies with the direct services. With record-low unemployment, mining companies are struggling to find labour and are starting to look more at the east coast.
"To get to Kalgoorlie at the moment you've got to come all the way across to Perth and then double back," Mr Daff said. "We see it as an opportunity.
"It's only going to be three days a week, but we'll see how it goes and it's an incentive that the Kalgoorlie Council has encouraged us to look at that route."
The airline has yet to decide between Melbourne and Adelaide. Mr Daff concedes Melbourne has more appeal in passenger volume and it is where the mine companies are based.
Adelaide also has benefits because the shorter flying times allow Skywest to rotate aircraft for other services.
"Adelaide has some operational efficiencies, but we're leaning towards Melbourne. The Kalgoorlie community is also leaning towards Melbourne, but it has some operational issues for us," he says.
"We plan on making an announcement on August 27 about the exact start date and which city it will be, Adelaide or Melbourne," Mr Daff said.
The airline is also tendering for more mining work to underpin its expansion.
It is well aware that the $80 billion in major resources projects under way or planned for Western Australia translates into a lot of bums on scheduled charter seats.
With two of the new F100s arriving in October and a third in March, Mr Daff said, it would be hard to justify acquiring the aircraft solely for passenger routes.
"We can justify the majority of the aircraft acquisitions on a contract for a mining company and then, in the spare time when they're not being used we can fly them to the communities. We think it works very well for us."
He is well aware, however, that Skywest is not the only airline attracted by the west's boom.
Of Virgin Blue's decision to acquire Embraer regional jets, Mr Daff said Virgin could cause problems in the longer term.
Virgin, however, is focusing its Embraer operations in the east, he said. "I guess the issue we have here in the west is that most of our routes are very long and thin and that obviously creates some issues for the likes of Virgin.
"When we have an aircraft go unserviceable it goes in a bad way because you end up with aircraft stuck in the middle of nowhere for a couple of days.
"That risk factor for the likes of Virgin is quite high because they would want to rotate their Embraers through to do quite a lot of services to get utilisation up."
Skywest was sticking with the F100s because of their low capital cost, which he estimated at about a fifth that of a new Embraer regional jet of similar capacity.
Virgin would need to spend a lot of hours in the air to spread its higher fixed cost and create a base in Western Australia.
"I think they will, long term," he said. "But they will probably focus their Embraers on the east coast for, my gut feel tells me, at least 12 to 18 months.
"The other one we have to worry about is AirNorth. It also has an Embraer and it has indicated it might start operating that on one of our routes, such as Kununurra to Perth.
"That obviously presents some challenges for us."
Concerning the new player on the scene, Singapore-backed Tiger Airways, Mr Daff said he was glad the action was mostly happening in the east.
"I know it's coming here soon," he said. "But again, the A320 probably isn't the right aircraft for internal WA.
"With the exception of Karratha, there really isn't a route that has enough volume to warrant an A320 a couple of times a day, or even once a day."
Labour shortages may also make it difficult to set up operations in Western Australia, Mr Daff said.
"Finding staff in Western Australia, with its 2 per cent unemployment is near impossible at the moment," he said.
Skywest is due to publish its annual results in September-October, but profits continued to look healthy, Mr Daff said.
Figures published for the nine months to March showed net profit was 475 per cent higher than for the previous corresponding period, with total revenues up by a third.
Scheduled charter revenue rose 62 per cent, while regular route revenue increased 25 per cent and average fares were up 15 per cent.
"You'll see quite a large profit increase but - and I'm going to sound like Geoff Dixon here - it's still not where it needs to be," Mr Daff said.
"We're still not getting the return on the capital investment that we need to, but compared with where Skywest has been in the past few years, it's actually a good result. Partly, that result is driven by just getting better use out of our assets.
"When I came on board, some of the aircraft were flying only four or five hours a day.
"Because everything has ramped up here quite a bit in the marketplace, we're now flying those aircraft a lot harder and getting much better economies of scale."
_________________
Skywest catches resources tailwind
Steve Creedy, Aviation writer | August 10, 2007
PERTH'S Skywest Airlines is entering an era of expansion as it catches a strong updraft from Western Australia's booming economy and the growth of fly-in/fly-out mining.
The after effects of the bitter takeover battle waged by Perth-born Jeff Chatfield and his Singapore-based company, Captive Vision Capital, have faded and the airline is planning to double its fleet of Fokker 100 jets to six.
It is also scouting out replacements for its seven ageing Fokker 50s, boosting its network and planning an ambitious move to connect the Goldfields town of Kalgoorlie to the east coast.
Former Jetstar Asia executive Paul Daff has had his feet under the chief executive's desk for three months and says the growth is a combination of the boom in fly-in/fly-out mining contracts and rising regular public transport traffic.
Mr Daff said he worked closely with managing director and industry veteran Hugh Davin and chief operating officer Mike Hoare to make sure Skywest benefited from the boom in Western Australia.
"We've ramped up quite a lot of our regular public transport routes to places like Geraldton, Albany, Broome and everywhere else as well," he said.
"When Qantas pulled out of Kununurra, we ramped up Kununurra with the F100 and even Exmouth, which used to be a Fokker 50 route, is predominantly an F100 route now. We went back into Port Hedland."
Skywest has a diverse route network that takes it as far as Darwin and Bali and involves carrying about 350,000 passengers a year.
Mr Chatfield said yesterday the group was also considering services to Singapore.
Mr Daff said the planned Kalgoorlie-east coast route would be for passengers, partly driven by demand from the Goldfields region.
The airline hopes to link in the mining companies with the direct services. With record-low unemployment, mining companies are struggling to find labour and are starting to look more at the east coast.
"To get to Kalgoorlie at the moment you've got to come all the way across to Perth and then double back," Mr Daff said. "We see it as an opportunity.
"It's only going to be three days a week, but we'll see how it goes and it's an incentive that the Kalgoorlie Council has encouraged us to look at that route."
The airline has yet to decide between Melbourne and Adelaide. Mr Daff concedes Melbourne has more appeal in passenger volume and it is where the mine companies are based.
Adelaide also has benefits because the shorter flying times allow Skywest to rotate aircraft for other services.
"Adelaide has some operational efficiencies, but we're leaning towards Melbourne. The Kalgoorlie community is also leaning towards Melbourne, but it has some operational issues for us," he says.
"We plan on making an announcement on August 27 about the exact start date and which city it will be, Adelaide or Melbourne," Mr Daff said.
The airline is also tendering for more mining work to underpin its expansion.
It is well aware that the $80 billion in major resources projects under way or planned for Western Australia translates into a lot of bums on scheduled charter seats.
With two of the new F100s arriving in October and a third in March, Mr Daff said, it would be hard to justify acquiring the aircraft solely for passenger routes.
"We can justify the majority of the aircraft acquisitions on a contract for a mining company and then, in the spare time when they're not being used we can fly them to the communities. We think it works very well for us."
He is well aware, however, that Skywest is not the only airline attracted by the west's boom.
Of Virgin Blue's decision to acquire Embraer regional jets, Mr Daff said Virgin could cause problems in the longer term.
Virgin, however, is focusing its Embraer operations in the east, he said. "I guess the issue we have here in the west is that most of our routes are very long and thin and that obviously creates some issues for the likes of Virgin.
"When we have an aircraft go unserviceable it goes in a bad way because you end up with aircraft stuck in the middle of nowhere for a couple of days.
"That risk factor for the likes of Virgin is quite high because they would want to rotate their Embraers through to do quite a lot of services to get utilisation up."
Skywest was sticking with the F100s because of their low capital cost, which he estimated at about a fifth that of a new Embraer regional jet of similar capacity.
Virgin would need to spend a lot of hours in the air to spread its higher fixed cost and create a base in Western Australia.
"I think they will, long term," he said. "But they will probably focus their Embraers on the east coast for, my gut feel tells me, at least 12 to 18 months.
"The other one we have to worry about is AirNorth. It also has an Embraer and it has indicated it might start operating that on one of our routes, such as Kununurra to Perth.
"That obviously presents some challenges for us."
Concerning the new player on the scene, Singapore-backed Tiger Airways, Mr Daff said he was glad the action was mostly happening in the east.
"I know it's coming here soon," he said. "But again, the A320 probably isn't the right aircraft for internal WA.
"With the exception of Karratha, there really isn't a route that has enough volume to warrant an A320 a couple of times a day, or even once a day."
Labour shortages may also make it difficult to set up operations in Western Australia, Mr Daff said.
"Finding staff in Western Australia, with its 2 per cent unemployment is near impossible at the moment," he said.
Skywest is due to publish its annual results in September-October, but profits continued to look healthy, Mr Daff said.
Figures published for the nine months to March showed net profit was 475 per cent higher than for the previous corresponding period, with total revenues up by a third.
Scheduled charter revenue rose 62 per cent, while regular route revenue increased 25 per cent and average fares were up 15 per cent.
"You'll see quite a large profit increase but - and I'm going to sound like Geoff Dixon here - it's still not where it needs to be," Mr Daff said.
"We're still not getting the return on the capital investment that we need to, but compared with where Skywest has been in the past few years, it's actually a good result. Partly, that result is driven by just getting better use out of our assets.
"When I came on board, some of the aircraft were flying only four or five hours a day.
"Because everything has ramped up here quite a bit in the marketplace, we're now flying those aircraft a lot harder and getting much better economies of scale."
_________________
Where he says "With the exception of Karratha"
I would say Karratha and Broome. Broome is very popular but very pricey as is Karratha, if the price was even a hundred bucks cheaper so many more people would fly from here.
Roll on OzJet and DJ, wouldnt be suprised to see a few XR charters up this way soon especially with the new gas project coming online soon, thats alot of FIFO workers.
I would say Karratha and Broome. Broome is very popular but very pricey as is Karratha, if the price was even a hundred bucks cheaper so many more people would fly from here.
Roll on OzJet and DJ, wouldnt be suprised to see a few XR charters up this way soon especially with the new gas project coming online soon, thats alot of FIFO workers.
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Last I checked, 737-800 operating to KA, BRM, KG, and in the not too distant past a 737 ( 400? ) went to Argyle.
Bearing in mind that they are operating at QFs inflated costs not Tigers.
Very well informed ( and maybe a little worried ) chap this Mr Daff
Bearing in mind that they are operating at QFs inflated costs not Tigers.
Very well informed ( and maybe a little worried ) chap this Mr Daff
Speaking to a source who works for Woodside who organises FIFO workers and charters, she was saying that once Skywest gets another a/c they may be able to provide XR more traffic to Karratha not through Woodside themselves as they are in bed with QF but partner companys like Transfield etc.
But at the start of next year theres going to be quite a few charters because of the new pluto gas project.
But at the start of next year theres going to be quite a few charters because of the new pluto gas project.
Didn't another Perth based FIFO operator try PH-KA as charter and ran foul of Qantas; running charter to an RPT served destination more than x times per week is not allowed
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running charter to an RPT served destination more than x times per week is not allowed
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TE3, hows it going.
Iccy is quite correct with what he says, and I might add, knows from first hand experiance!
A operator DID do charters for a VERY large company in and out of KA on a regular basis. The big Q did put a stop to it, under the protection of routes rules which are in the WA Gov Aviation Regs.
richo
Iccy is quite correct with what he says, and I might add, knows from first hand experiance!
A operator DID do charters for a VERY large company in and out of KA on a regular basis. The big Q did put a stop to it, under the protection of routes rules which are in the WA Gov Aviation Regs.
richo
Skywest could be operating PER-KTA by November
Morning all,
Skywest has said that they are looking at comencing PER-KTA if people will use them in November 1 month after OzJet will begin operations.
In the pilbara news they said that Ozjet and them will bring the price down and bring more competition. Qantas is increasing to 7 services daily 4 Link and 3 Qantas.
Funny though, at the moment we have no competiton what so ever and by November there would be say 10 services daily 7 QF, 2 OZ, 1 XR. I guess if they can bring the price down to say $400-450 more people will fly. Hopefully we have a big price war and can get some good fares.
But personally unless both XR and OZ get a contract of sorts or decent support, one of those is going to have to give. Just hope this town supports these airlines otherwise its going to go back to a QF town. With another 1000 people expected to be living here by this time next year (dunno where they are going to live though!!) more FIFO workers which generally fly QF which does make it hard to get flights. They might do alright.
I'll hold off booking flights for December/Jan/Feb untill we find out than one or both of these guys start up!
Skywest has said that they are looking at comencing PER-KTA if people will use them in November 1 month after OzJet will begin operations.
In the pilbara news they said that Ozjet and them will bring the price down and bring more competition. Qantas is increasing to 7 services daily 4 Link and 3 Qantas.
Funny though, at the moment we have no competiton what so ever and by November there would be say 10 services daily 7 QF, 2 OZ, 1 XR. I guess if they can bring the price down to say $400-450 more people will fly. Hopefully we have a big price war and can get some good fares.
But personally unless both XR and OZ get a contract of sorts or decent support, one of those is going to have to give. Just hope this town supports these airlines otherwise its going to go back to a QF town. With another 1000 people expected to be living here by this time next year (dunno where they are going to live though!!) more FIFO workers which generally fly QF which does make it hard to get flights. They might do alright.
I'll hold off booking flights for December/Jan/Feb untill we find out than one or both of these guys start up!
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Richo,
I stand corrected. Come to think of it, it can happen the other way as well. XR were encouraged to make two of their ZNE charters RPT services to provide limited competition....extremely limited in the case of ZNE.
Saw you doing the walkaround at ZNE on Monday...
As for OzJet and XR and KTA i feel it's not going to work without a contract....
I stand corrected. Come to think of it, it can happen the other way as well. XR were encouraged to make two of their ZNE charters RPT services to provide limited competition....extremely limited in the case of ZNE.
Saw you doing the walkaround at ZNE on Monday...
As for OzJet and XR and KTA i feel it's not going to work without a contract....
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You could bet a million dollars that QF WILL lower fares to what the opposition is offering, and people will still fly QF to keep their FF points rolling on.
When the new carriers are then not supported, they pull out because they have no choice - and then the prices will go back up to what they were, or higher. Unfortunately it's the way the cycle goes at places like this.
Although this might change when the E Jets roll into WA on a permanent basis, supported by a FF program, and connections to over East etc.
Time will tell.
(its about now I expect Capn Bloggs to come in with a "bring it on" type of challenge)
When the new carriers are then not supported, they pull out because they have no choice - and then the prices will go back up to what they were, or higher. Unfortunately it's the way the cycle goes at places like this.
Although this might change when the E Jets roll into WA on a permanent basis, supported by a FF program, and connections to over East etc.
Time will tell.
(its about now I expect Capn Bloggs to come in with a "bring it on" type of challenge)
As for OzJet and XR and KTA i feel it's not going to work without a contract....
Hopefully the stupid people in this town will realise that they actually have to use another airline to keep the low prices not run the airlines out of town.
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Hopefully XR will be more reliable than their last effort. Even the terminal girls would sometimes wonder if XR is going to turn up or not. Plus all their flights were at a different time every day which makes it hard for mining FIFO rostering. XR has a better in flight product than QF too! Hopefully XR can get a leg up this time!
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wow bloggs very creative!!! i'm actually predicting the 717 fleet to shrink with the resources boom as more routes get served by larger B737-800s, especially the inland Pilbara (ZNE and PBO)
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More like a nice seat and smile from the Alliance crew at the mo. Them and National Jet seem to be doing a heap of flying for em as one of their's is parked up mising a donk....